Trade Microsoft Stock
Microsoft Corporation, the world’s biggest software company, was formed by two childhood friends; Harvard dropout Bill Gates and Paul Allen. In 1975, the two friends came together, and they would later be joined by Steve Ballmer, Bill Gates’ former classmate at Harvard, who became the new company’s president in 1980.
Shortly after this, Microsoft was approached by IBM to work on a project which they had codenamed “Chess.” In response, Microsoft built a brand-new operating system, which would essentially be the brains of the IBM computer, and which allowed the software to work in sync with the hardware. They called the new operating system the Microsoft Disk Operating System (MS-DOS). Thanks to the aggressive business tactics employed by Microsoft, DOS spread quickly. The company’s strategy was to try and get the operating system running on as many computers as it could instead of looking to earn a lot of money from just one deal. Still, DOS remained alien to many consumers. In 1985, in order to simplify the use of personal computers for the average person, Microsoft released its first graphical interface known as Windows 1.0. When compared to DOS, Windows was a revelation, as people could navigate the screen with a mouse and click to open files, applications and directories, instead of typing hard-to-remember commands.
On March 13, 1986, the company’s stock went public as a result of strong public demand. In the meantime, the Windows operating system continued to mature and evolve, making Microsoft the world’s largest PC software company by 1988. Subsequent versions of Windows also performed well, with both Windows 3.0 (released in 1990) and Windows 3.1 (1992) selling 10 million copies within their first two years. Microsoft was starting to become a household name. The next version, Windows 95, performed even better, selling seven million copies in just the first five weeks following its release. This was largely down to its inbuilt support for a feature that was then barely known – the Internet. By the time the Windows 95 version was released, the prior versions of DOS and Windows were installed on about 80% of all PCs worldwide.
In the last decade and a half, the company has diversified its product offerings in step with changing consumer requirements. This has seen Microsoft branch out into the development of Xbox game consoles, cloud computing (the Microsoft Cloud – Azure) and Windows Phone mobile devices. Microsoft certainly is not a front-runner in the mobile or more specifically smartphones space, but when it comes to desktop computing, Microsoft still holds the dominant position.
Investors first got a taste of Microsoft in March 1986 when the firm, which was already a tech powerhouse by that time, went public in an IPO which raised $61 million. During the IPO, the company’s shares were sold for $21 each, but have since been split 9 times. It is worth noting that Microsoft waited for more than a decade since it was founded to go public, unlike newer tech companies that often go public within a handful of years from inception. However, Microsoft had a number of aces up its sleeve which helped the company to avoid going public for such a long time: mainly, it did not lose money year on year and was mostly free from the influence of venture capitalists. What this meant is that the company’s path to being publicly traded did not have any of the normal pressures of impatient investors or falling cash reserves. In 2000, at the height of the Dot Com bubble, the company’s market cap hit $600 billion, making Microsoft one of the world’s largest companies. However, when the bubble burst, Microsoft would have to wait about 17 years to reach this level again. In 2018, Microsoft has reached a market cap of $886 billion, making it the fourth largest publicly traded technology company in the world, trailing only AAPL Inc., Alphabet and Amazon.
How to Trade Microsoft Stocks?
Following several years of stagnation, the tech giant’s stock really started to take off in 2013 and has gone from strength to strength since then. In the 5 years that followed, Microsoft shares have almost quadrupled in value, and with the positive developments that surround the company, it is likely that the stock price will rise further. As of September 2018, Microsoft stocks trade on the NASDAQ at around $115.61 a share under the ticker MSFT.
Besides the positive long-term outlook, certain factors affect the share prices short-term fluctuations, and which are important to note if you are a short-to-medium-term trader of Microsoft stock:
- Competitor Performance
Microsoft faces a lot of competition from several companies operating in the technology sector, mostly because the tech space is continually expanding and evolving. There are hundreds of successful start-ups with cutting-edge technologies entering the market every year that could challenge parts of Microsoft. Microsoft will need to devote significant resources to deploy strategies in emerging sub-sectors, such as the cloud and mobile computing.
- New Products/Services Rollout
The Redmond-based tech giant is no longer as stagnant and sluggish as it once was. Thanks to its success in effectively and substantially diversifying its core business and reinvigorating its growth, the company is slowly becoming a more exciting prospect to traders and investors.
- Periodical Earnings Reports
On September 2018, Microsoft shares reached new heights as they pushed away from around the $115 level and continued a steady rise past a 50-day moving average that goes back to early April 2018. This run has been boosted by a dividend that was announced in late September from 42 cents to 46 cents per share. The positive earnings reports meant that the Microsoft’s stock price was riding on strong market tailwinds.
- Slowdown in consumer desktop computing
As certain areas like cloud computing continue to boost the company’s numbers, it is no secret that its flagship business, the Windows OS, is struggling. One reason is the stagnating demand for PCs as more people adopt mobile computing on mobile phones and tablets. In addition, upgrade cycles are getting longer.
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Microsoft Stock Trading Main FAQs
- What should I know about Microsoft?
Microsoft is best known for its Windows operating system, although it has branched out significantly over the years into many other areas, such as gaming, productivity, and cloud computing. Microsoft is considered to be one of the older, blue chip technology companies, and its shares have been trading since 1985, when they were just $0.07 a share. In comparison, the stock now trades over $200 a share (as of June 2020). Microsoft endured a long period of range bound trade, with the stock trapped between $18 and $38 from 2000 until late 2013.
- Is Microsoft a good stock to trade?
During its long period of range bound price action Microsoft was a favorite of traders who would buy when the stock reached the lower bounds of the range, and then sell as it reached the upper bounds of the range. While that trade has gone away, Microsoft is still a good stock to trade thanks to its financial strength and its recent changes that have made it far more competitive. Microsoft has seen great growth in its cloud computing platform, and the trend towards remote work also plays in its favor. Microsoft should remain a good trade for years to come.
- What is the best strategy for trading Microsoft?
Because it is a blue chip technology name Microsoft has become a good choice among all levels of traders. It tends to have more orderly price action, making it easier to predict upcoming moves for the stock. The long-term uptrend in the stock recommends that traders look primarily to long positions, which they can do through a trend following strategy, or by using support and resistance levels to locate potential entry and exits points. As is the case in any trade, the best strategy is the one that you feel comfortable with and that you understand.